Practice Exam 4 Flashcards
If an American exporter will be paid 25 million Japanese yen when her goods arrive in 45 days, her best hedge is to:
A) sell yen calls.
B) buy yen calls
C) buy yen puts.
D) sell yen puts.
Buy Yen Puts;
The exporter does not want to see the value of the yen fall. If she owns yen puts and the yen does fall, her profit on the puts would help compensate for the decrease in the value of the yen. Selling yen calls would also provide protection if the yen fell in value, but only to the extent of the premium received. Exporters buy puts in order to hedge; importers buy calls on the foreign currency to hedge.
Which of the following describe a securities exchange?
I. Prices are set by negotiation between interested parties.
II. The highest bid and the lowest offer prevail.
III. Only listed securities can be traded.
IV. Minimum prices are established at the beginning of the day.
II. The highest bid and the lowest offer prevail.
III. Only listed securities can be traded.
Once a variable annuity has been annuitized:
A) each annuity unit’s value is fixed, but the number of annuity units varies with time.
B) the number of annuity units is fixed, and their value remains fixed.
C) each annuity unit’s value and the number of annuity units vary with time.
D) each annuity unit’s value varies with time, but the number of annuity units is fixed.
each annuity unit’s value varies with time, but the number of annuity units is fixed;
During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. The value of an annuity unit varies from month to month according to the performance of the separate account in comparison to the assumed interest rate.
If an investor opens a new margin account and buys 100 shares of DWQ at 18, with Regulation T at 50%, what is the investor’s initial margin requirement?
2000
3600
1800
900
If the initial transaction is less than $2,000, the investor must deposit 100% of the market value.
Which of the following are required to be given to retail customers at settlement in municipal new issue transactions?
I. Confirmation showing the purchase price.
II. Official statement.
III. Names of syndicate members with their participation amounts.
IV. Copy of the agreement among underwriters.
I. Confirmation showing the purchase price.
II. Official statement.
When speaking to a customer about exchange-traded funds (ETFs), a registered representative could CORRECTLY state that these funds
A) do not have the same potential tax consequences as mutual funds, such as making capital gains distributions annually
B) cannot be purchased using traditional limit or stop orders
C) can be purchased only by paying a sales charge added to the NAV
D) cannot be bought on margin
do not have the same potential tax consequences as mutual funds, such as making capital gains distributions annually
In the sale of open-end investment company shares, the prospectus must be delivered:
A) at or before redemption.
B) before the sales solicitation .
C) within 7 days of request.
D) to the client either before or during the sales solicitation.
Potential mutual fund customers must receive a prospectus before or during the sales solicitation.
If a customer gives specific instructions to his registered representative to purchase a security that is clearly unsuitable in light of the customer’s investment objectives, under FINRA rules, the registered representative:
A) can only enter the order with the prior approval of a principal.
B) can enter the order.
C) can only enter the order if the customer puts his verbal instructions into written form.
D) cannot enter the order.
can enter the order;
Under FINRA rules, the representative may execute the trade at the customer’s request; the trade ticket should indicate that the order was unsolicited.
A confirmation to a customer purchasing a new issue of municipal securities must disclose all of the following EXCEPT:
A) coupon rate and maturity date.
B) settlement date.
C) current yield.
D) customer’s name.
current yield;
MSRB confirmations must include the customer’s name, trade and settlement dates, coupon rate and maturity, and the yield to maturity or yield to call (whichever is lower). The current yield (annual interest/current market price) is not included on confirmations.
The visible supply includes all of the following EXCEPT:
A) municipal notes.
B) GO bonds.
C) revenue bonds.
D) industrial development bonds
municipal notes;
Short-term notes are not part of the visible supply, which measures the dollar amount of new issues scheduled over the coming month.
Which of the following are defined as penny stocks?
I. Nasdaq stock trading at $4 per share.
II. Bulletin Board stock trading at $4 per share.
III. Listed stock trading at $4 per share.
IV.”OTC Pink” stock trading at $4 per share
II. Bulletin Board stock trading at $4 per share.
IV.”OTC Pink” stock trading at $4 per share;
A penny stock is a non-Nasdaq (Bulletin Board or “OTC Pink”) stock trading under $5 per share. If a stock is listed on an exchange or is on Nasdaq, it is not a penny stock regardless of price.
If the yield curve becomes inverted, a likely cause would be that the Fed has:
A) loosened short-term credit.
B) tightened long-term credit.
C) tightened short-term credit.
D) loosened long-term credit.
tightened short-term credit;
The Fed’s influence on rates is primarily on the short end of the yield curve. Both the discount rate, which it sets, and the federal funds rate, which it influences, are short-term rates. The Fed tightens short-term credit when the economy appears to be overheating. To slow things down, the Fed raises short-term rates to extremely high levels.
Mutual fund Class B shares assess
A) no load
B) a level load
C) a deferred sales load
D) a front-end load
Class B shares carry a deferred sales load. This is sometimes referred to as a back-end load. Class A shares carry a front-end load. Class C shares charge a 12b-1 fee quarterly with a small back-end load in the first year.
One broker/dealer receives a don’t know (DK) notice from another. Which of the following would be a reason for a DK to be sent?
A) The broker/dealer who sent the DK is alerting the other broker that one of their clients has opened a new account with them.
B) The broker/dealer who sent the DK was expecting 200 shares of ABC common stock and received 200 shares of ABC preferred shares.
C) The broker/dealer who sent the DK wants to know if the other broker’s customer wants to trade more stock at the same price.
D) The broker/dealer who sent the DK is confirming that the trade specifications are good.
The broker/dealer who sent the DK was expecting 200 shares of ABC common stock and received 200 shares of ABC preferred shares;
DKs are sent between brokers when delivery is made that is either not expected or where the specifications of the delivery do not match what was expected.
If a customer wishes to buy 1 XYZ option and sell another XYZ option, but he is not willing to spend more than $300, which of the following orders should be entered?
A) 2 stop orders.
B) A spread order.
C) A straddle order.
D) 2 limit orders.
A spread order;
A spread involves the simultaneous purchase and sale of different option contracts of the same type. A spread incurs a gain or loss depending on what happens to the difference in the premiums between the two contracts. Because this investor wants to limit his risk to $300, he would buy the spread at a net debit of $300 or less (this is one order, not two).
